## IN THE SUPREME COURT O F TEX AS

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. 13-0573

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O N P E T I T I O N F O R R E V I E W F R O M T H E C O U R T O F A P P E A L S F O R T H E F O U R T H D I S T R I C T O F T E X A S

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Argued October 14, 2014

J U S T I C E G R E E N delivere d the opinion of the Court.

This case involves a fede ral statutory exception to the g ener al rule that fede ral law pree mpts
state law. One of the fede ral laws at issue, the McCarr an -F er gu s on Act (MFA ), 15 U.S.C. §§ 1011–1015, provides an exemption from pree mption that applies to state statutes enac ted for the
purpose of reg ulating the business of insurance

. The trial court found that the MFA applied, trig g ering the exemption under which the Fe dera l Arbitration Act (F AA), 9 U.S.C. §§ 1–16, would
not pree mpt section 74.451 of the Texas Civil Practice and Remedies Code, rela ting to ag ree ments
to arbitra te health car e liability cl ai m s
. The trial court denied the defe ndant’s motion to compel arbitra tion beca

use the arbitra

tion clause d i d not comply with section 74.451 and was there fore invalid. The defe ndant filed an interlocutory appea l, and the court of appea ls aff irmed. 406 S.W .3d313, 315 (Tex. App.—San Antonio 2013). We hold that the MFA does not apply to section 74.451

and re verse the cour

t of appe als’ judg ment.
I. F actual and Proc edural Backgroun d The Fr eder icksburg Care Company , L .P. (F re d er i cksburg) , opera tes a health car e fac ility —commonly known as a nursing home—that s p ec ializes in providing long- term car e to patients. Elisa Z apata was a patient and resident under the car e and supervision of Fr eder icksburg
at the time of her death. Z apata ’s d eath and survival benef iciarie s (the Be nefic iaries) sued
Fr eder icksburg for neg lige nt car e and wrong ful death. Fr eder icksburg moved to compel arbitra tion based on an arbitra tion clause contained in an ag ree ment that Z apata signe d prior to he r admission into the nursing home

. I t is undisputed that the pre-admission ag ree ment’s arbitration clause did not comply wi th section 74.451’s require ment that an ag ree ment to arbitra te a health car e liability claim must contain

a written notice in bold-ty

pe, ten-point font that conspicuously war ns the patient of sever al important rig hts. See T E X
. C I V
. P R A C
. & R E M
. C O D E § 74.451(a)

. Nonetheless, Fr eder icksburg ’s m otion to compel arbitra tion asser

ted that fede ral law sho u l d deter mine the enfor cea

bility of the arbitra tion clause beca

use the underly ing patient–provider transac tion i n v o l v ed interstate commerc e, which made the FAA applicable to the pre- admission ag ree ment. I n Fr ed er i ck s b urg ’s view, the FAA
pree mpted section 74.451 beca use the two laws direc tly conflicte d, and the FAA there fore preve nted the ar bitration clause f

rom being invalidated. The Be nefic iaries did not dispute Fr eder icksburg ’s position that the FAA woul d normally
pree mpt section 74.451. Rather, they arg ued that section 74.451 was part of a state law enac ted for

2the purpose of reg ulating the business of insurance and fell within the protec tion of the MFA. The

MFA trumped preem ption under the FAA , the Benef iciarie s arg ued, because Congr ess create d an exemption from pree mption for any fede ral law that could be “co n s t ru ed to invalidate, impair, or
superse de any law enac ted by any State for the purpose of reg ulating the business of insurance .” See
15 U.S.C. § 1012(b). The trial court denied Fr eder icksburg ’s motion to compel arbitra tion, and
Fr eder icksburg filed an inter locutory appea l.
The court of appeal s af

fi rmed the trial court’s ruling

. 406 S.W .3d at 315. The court of
appea ls noted that section 74. 4 5 1 is part of the Texas Medica l L iability Act (TML A), and that Chapter 74 succe eded the Texas M ed ical L iability I nsuranc e I mprovement Act (TML I I A). Id. at
320. After examining the rea soning of courts interpre ting the ear lier, substantially identical TML I I A provision, the court of appea ls conclude d that “sec tion 74.451 is part of a law enac ted for the purpose of protec ting and manag ing the perf ormanc e of insurance policies in the are a of medical malprac tice
and health car e liability ,” and there fore fell within the MFA’ s protec tion. Id. at 324. I n making this
deter mination, the court of appea ls looke d to the leg islative purpose behind Chapter 74 as a whole
in deciding that it, much like its TML I I A prede cessor , was enac ted to reg ulate the busin ess of
insurance i n T ex as. Id. at 324–25. The court of appea ls held that the MFA applied to exempt section 74.451 from FAA pree mption, and the trial court proper ly denied Fr eder icksburg ’s motion
to compel arbitra tion beca use the arbitra tion clause was unenfor cea ble under section 74.451. Id. at
325–26. We g rante d Fr eder icksburg ’s petition f or revie w. 57 T E X
. S U P
. C T
. J

. 305, 307 (Mar

. 21, 2014).

3II. F AA P ree m ption

The parties do not dispute that the FAA , when a pplicable, pr eempts section 74.451 except when an exemption applies. The trial court and court of appea ls both assumed without deciding that the FAA applied in this case , allowing them to rea ch the MFA question. S ee i d

. at 322. This
approa ch is c onsistent with the approa ch other courts of appea ls have taken. See In re Sthran , 327
S.W .3d 839, 845–46 (Tex. App.—Dallas 2010, orig

. proce eding ); In re Kepka , 178 S.W .3d 279, 288
n.9 (Tex. App.—Houston [1st Dist.] 2005, orig . proce eding ), disapproved of on other grounds by
In re Labatt Food Serv., L.P. , 279 S.W .3d 640 (Tex. 2009) (orig

. proce eding ). We note, howeve r, that if the FAA does not apply , then section 74.451 is not pree mpted and it is unnece ssary to addre ss whether the MFA provides an e x emption from FA A pre emption. The FAA applies to arbitra tion clause s in contra cts that aff ect interstate commerc e. In re L
& L Kempw ood Assocs., L.P. , 9 S.W .3d 125, 127 (Tex. 1999) (orig

. proce eding ) (per curia m) (re cog nizi ng that the FAA “extends to any contra ct aff ecting commerc e, as far as the Commerce Clause of the United States Constit ution will rea ch”) (citing Allied-Bruce Terminix Cos.v. Dobson , 513 U.S. 265, 273–77 (1995))

. We have previously conclude d that evidenc e of Medica re pay ments made to a health car e provider on a patient’s behalf was “suff icient to establish interstate commerc e and the FAA ’s application” to the case
. In re Nexion Health at Humble, Inc. , 173 S.W .3d 67, 69 (Tex. 2005) (orig

. pro ce ed i n g) (per curia m). The rec ord in this case ref lects that Fr eder icksburg

rec eived Medicare pay

ments on behalf of the decease d patient, Zapa ta, and the parties have never challeng ed the a

pplicability

of the F AA in this case. See id. We theref ore a ssume, as did the trial
court a nd court of a

ppeals, that the F AA applies he re.
4I n 2005, this Court held that the FAA pree mpted a Texas Arbitration Act (TAA) require ment

that an attorney sign a client’s ag ree ment to arbitra te a persona l injury claim. Id. This was beca use the TAA require d an additional element—the attorne y ’s sig nature —that the FA A did not, and t he laws wer e in direc t conflict. Id. Apply ing that prec edent here , section 74.451’s require ment that an arbitra tion clause provide a bold and conspicuous war ning of a patient’s rig ht to consult an attorney and the require ment that an attorney must sign the ag ree ment are additional requirements that direc tly conflict with the FAA , whi ch co n t ai ns no such require ments. See id. ; see also Doctor’s
A s s o cs ., Inc. v. Casarott o , 517 U.S. 681, 683 (1996) (finding that the FAA pree mpted a n ea rl y identical statute that require d a specific notice to appea r on the first pag e of an ag ree ment containing

an arbitra tion clause ). Compare 9 U.S.C. § 2, with T E X
. C I V
. P R A C
. & R E M
. C O D E § 74.451(a)

. Thus, the FAA pree mpts section 74.451 and the parties will be compelled to arbitra te—despite the arbitra tion clause ’s defic iencies under section 74.451—unless the MFA exempts the Texas law from
FAA pree mption.
III. MF A Applicabi lity The MFA pr ovides that the re g ulation and taxation of the business of insurance is a matter of state law. See 15 U.S.C. § 1012(a)

. The MFA provision at issue here , section 1012(b), states in full:
No Act of Congr ess shall be construed to invalidate, impair, or superse de any law enac ted by any State for t h e p urpose of regulating the business of insurance , or which imposes a

fee or tax upon such business, unless such Act specific ally rela tes to the bus iness of i nsuranc e: Provided , That after J une 30, 1948, the Act of J uly 2, 1890, as amende d, known as the Sherman Act, and the Act of October 15, 1914, as amende d, known as the Clay ton Act, and the Act of September 26, 1914, known as

5the Fe dera l Trade Commi ssion Act, as amende d, shall be applicable to the business

of insuranc e to the extent that such business is not reg ulated by State law. Id. § 1012(b) (first emphasis added) (citation omitted). This case require s us to interpre t and apply fede ral pree mption law, and there fore United States Supreme Court prec edent controls the outcome. See E i ch elberger v. Eichelbe rger , 582 S.W .2d 395, 401 (Tex. 1979). I n analy zing the MFA, the Supreme Court observed t hat s ection 1012(b) is divided into two clause s. U.S. Dep’ t of Tr easury

v. Fabe , 508 U.S. 491, 504 (1993). The second clause deals with antitrust matters, see id. , and is not
at issue here

. This case conce rns the MFA’ s first clause , which applies to laws “ena cted by any State for the purpose of reg ulating the business of insurance .” 15 U.S.C. § 1012(b). Courts have analy zed the MFA’ s first clause under a three -par t test that deter

mines whether : “(1) the fede ral statute does not spe cifica lly rela te to the ‘business of insurance ,’ (2) the sta te law wa s enac ted for the ‘purpose of reg ulating the business of i nsuranc e,’ and (3) the fede ral statute opera tes to ‘invalidate, impair,

or superse de’ the state law.” Munich Am. Reinsurance Co. v. Crawf ord , 141 F.3d 585, 590 (5th Cir. 1998); see also Davister Corp. v. United Republic Life Ins. Co. , 152 F.3d 1277, 1279 n.1 (10th Cir. 1998). The MFA applies here i f ea ch p ar t o f the t est is satisfied. See Davister C orp. ,152 F.3d at 1280 n.2 (“[The] three- part test must be satisfied be fore the [MFA] can apply .”). Reg arding the first par

t of the t est, eve ry

court that ha s considere d the FA A in this contex t has conclude d that the FAA does not specific ally rela te t o t h e b usiness of insurance

. See, e.g. , Munich Am. Reinsurance Co. , 141 F.3d at 590; Am. Banke rs I ns. Co. of Fla. v. Crawf

ord , 757 So. 2d 1125, 1131 (Ala. 1999). We ag ree th at “[ t ] h er e i s no question that the FAA does not rela te specific ally to the business of i n suranc e,” Munich Am. Reinsurance Co. , 141 F.3d at 590, and

6there fore part one of the test is satisfied. Moreove r, the third p ar t of the test is satisfied by our

conclusion that the FAA direc tly conflicts with, and pree mpts, section 74.451 absent an exemption, and there fore opera tes to “invalidate, impair, or superse de” our state law. See 15 U.S.C. § 1012(b). Thus, only the second part of the test rema ins, and we must decide whether the state law in question
was “ enac ted by

[t he State of Texas] for the purpose of reg ulating the business of insurance .” See id.
We first consider exactly which state law is in question. Both parties’ main arg uments focus

on whether courts perf

orming an MFA analy sis should look at the specific statutory provision in dispute (sec tion 74.451) or the state law in its entirety (Chapter 74). The parties highlig ht instances wher e courts have employ ed eac h approa ch. The court of appea ls a naly zed Cha pter 74 as a whole in finding the MFA a

pplicable. 406 S.W.3d at 325.
Fr eder icks b u rg contends that Fabe require s us to analy ze section 74.451—a law that
reg ulates the contents of an ag ree ment to arbitra te a health car e liability claim betwee n a patient and

a health car e provider —in isolation from the statutory scheme that surrounds it. Be cause we cannot 1
look any further , acc ording to Fr eder icksburg , section 74.451 cannot be viewed as a law enac ted for the purpose of reg ulating the business of insurance to war rant MFA protec tion. See Garcia v. Island Program Designer, Inc. , 4 F.3d 57, 61–62 (1st Cir. 1993) (citi n g F a be , 508 U.S. at 508–10) (ana ly zing a single provision in an insurance company liquidation and insolvency statute instead of

M o r e a c c u r a t e l y , s e c t i o n 7 4

. 4 5 1 i s d i r e c t e d a t a g r e e m e n t s b e t w e e n a p h y s i c i a n , p r o f e s s i o n a l a s s o c i a t i o n o f 1 p h y s i c i a n s , o r o t h e r h e a l t h c a r e p r o v i d e r a n d a p a t i e n t o r p o t e n t i a l p a t i e n t

. T E X
. C IV
. P R A C
. & R E M
. C O D E § 7 4

. 4 5 1 ( a )

. F o r e a s e o f r e f

e r e n c e , w e r e f

e r t o s e c t i o n 7 4

. 4 5 1 a s a p p l y i n g t o a n a g r e e m e n t b e t w e e n a h e a l t h c a r e p r o v i d e r a n d a p a t i e n t

. 7examining the statute as a whole), abrogated on other grounds by Quack enbush v. Allstate Ins. Co. , 517 U.S. 706 (1996); see also Allen v. Pache co , 71 P.3d 375, 383 (Colo. 2003) (ana ly zing a specific
statute and finding it “irre levant” that other sections of the g rea ter statutory scheme “addr ess medical malprac tice issues not involving the r elationship betwee n an insurer and insured” ). Fabe ’s g uidance for how to evalua te a statu t e under the MFA is not as clea r as Fr eder icksburg sug g ests, howeve r. As rec og nized b y t h e United States Court of Appea ls for the Fifth Circuit: Fabe ’s holding and analy sis sug g est that a statute may require parsing to deter mine the ex tent of i ts pre- emptive power under the [MFA]. At the s ame t i me, however, the C o u rt s t o p ped short of di rec ting that this approa ch be taken in ever y case
. See [ Fabe , 508 U.S. at 509 n.8.]. Fabe ’s holding in this respe ct is simply unclear

. Munich Am. Reinsurance Co. , 141 F.3d at 592 (empha sis added)

. I n addition, the Be nefic iaries point
to an instance in which a court has taken the approa ch of evalua ting the entire state statutory scheme in pe rfor ming an MFA inquiry

. See Stephens v. Am. Int’l Ins. Co. , 66 F.3d 41 (2d Cir. 1995). The United States Court of Appea ls for the Second Circuit analy zed an anti-ar

bitration provision that was part of a state law that reg ulated insurance company liquidations, and that court ref used to limit its focus to the anti -a rbitration provision. See id. at 45. I nstead, the court evalua ted how the antiarbitra tion provision rela ted to the compre hensive reg ulatory scheme o f the liquidation act as a whole. See id.
I n deter mining whether t o l o o k at the entire act or the specific statute that conflicts with
fede ral law, we cannot ignor e the lang uag e of the MFA itself, which exempts from pree mption “any
law enac ted by any State for the purpose of reg ulating the business of i n s u ra n ce .” 15 U.S.C.

8§ 1012(b) (empha sis added)

. Thus, deter mining a state’s purpose in enac ting a law is fundame ntal
to a first-cla

use MFA inquiry

. We do not rea d Fabe to alter the applicability of our well-e stablished
rules for discerning a statute’s purpose, under which “[w]e deter mine leg islative intent from the
entire act and not just i solated portions.” 20801, Inc. v. Parker , 249 S.W .3d 392, 396 (Tex. 2008) (citing State v. Gonzalez , 82 S.W .3d 322, 327 (Tex. 2002)). Fur ther, “we will try to avoid construing

a statutory provision in isolation from the rest of the statute; we should consider the act as a whole,
and not just single phrase s, clause s, or sen t en ce s
. ” C ity of Austin v. Sw

. Bell Tel. Co. , 92 S.W .3d 434, 442 (Tex. 2002) (citation omitted); accord Calvert v. Tex. Pipe Line Co. , 517 S.W .2d 777, 781 (Tex. 1974) (“A n equally fundame ntal rule of statutory construction is t h at t h e intention of the
L eg islature must be asce rtained from the entire Act, and not from isolated portions there of.”) (citing City of Mason v. W

. Tex. Utils. Co. , 237 S.W .2d 27 3 (T ex
. 1951)); see also T E X
. G O V ’ T C O D E § 311.023 (establishing principles to assist courts in construing statutes); cf. Lexec on Inc. v. Milberg
W eiss Bershad Hyne

s & Lerach , 523 U.S. 26, 36 (1998) (desc ribing a “ce ntral tenant” of statutory interpre tation “that a statute is to be considere d in all its parts when construing any one of them”).
Acc ording ly , to decide whether section 74.451 is a “law enac ted by [t he State of Texas] for
the purpose of reg ulating the business of insurance ,” 15 U.S.C. § 1012(b), we first consider how that
section fits within the fra mework of Chapter 7 4 as a wh ole. See 20801, Inc. , 249 S.W .3d at 396 (stating that “whe n interpre ting [a specific statutory section], we must consider its role in the broade r statutory scheme ”). This is consistent with the appr o ac h taken in Fabe

. See Fabe , 508 U.S. at
494–97.

9A. Chapter 74

At the outset of the Fabe opinion, the Supreme Court car efully explained how the disputed statutory provision—an Ohio law that established a p ri o rity distribution hiera rchy for claimants
ag ainst insolvent insurance companies—f it within a broade r leg al structure

. Id. at 494. The Court b ega n by rec og nizi ng that “[t] he Ohio priority statute was enac ted as part of a com p l ex an d specia liz ed administrative structure for the reg ulation of insurance companies from ince p t i on to dissoluti on.” Id. (empha sis added)

. Then the Court quoted the Ohi o law’s self-state d purpose, detailed the entire chapte r’s fra mework, and outlined some of the broad power s the chapte r g rante d to state administrators in perf orming the law. Id. The Court c oncluded that “[i] t se ems fair to say that the eff

ect of all this is to empower the liquidator to continue to opera te the insurance company in all way s but one—the issuance of new policies.” Id. I n other words, the Supreme Court did not analy ze the specific state statutory provision that conflicte d with fede ral law until it first considere d the overa ll purpose, structura l fra mework, and eff

ect of the entire state law. We w ill do the same. I n evalua ting the purpose and overa ll structure of C h apter 74, we must keep in mind the

nece ssary focus of an MFA an al y s i s
. T h e MFA focuse s “upon the rela tionship betwee n the insurance company

and its policy

holders.” Id. at 501. “Statutes aimed at protec ting or reg ulating this rela tionship [between the insurer and the insured], direc tly or indirectly are laws reg ulating the ‘business of insurance .’” SEC v. Nat’l Sec., I nc. , 393 U.S. 453, 460 (1969). “The broad categ ory of laws enac ted ‘for the purpose of reg ulating the business of insurance ’ consists of laws that possess the ‘end, intention, or aim’ of adjusting, manag ing, or controlling the business of insurance .” Fabe , 508 U.S. at 505 (quoting B L A C K ’ S L A W D I C T I O N A R Y 1236, 1286 (6th ed. 1990)). A tenuous

1 0connec tion to the ultimate aim of insurance , howeve r, is insufficient to esca pe pree mption. Id. at 509 (citing with approva l Langdeau v. United States , 363 S.W .2d 327 (Tex. Civ. App.—Austin 1962, no writ)). “The rela tionship betwee n insurer and insured, the ty pe of policy which could be issued, its reliability , interpre tation, and enfor ceme nt—these wer e the core of the ‘business of insu ranc e.’” Nat’l Sec., Inc. , 393 U.S. at 460. Fabe noted that the cate g ory of laws “ena cted by any State for the
purpose of reg ulating the business of insurance ” nece ssarily encompa s s es “m o re than just the ‘business of insurance .’” Fabe , 508 U.S. at 505. Nonethele ss, Fabe stated that an analy sis of what activities constitute the “business of insurance ” can be rele vant to the inquiry of whether a law was

enac ted for the purpose of reg ulating the business of insurance

. See id. at 502–05. Courts ap p l y three non-dispositive criter ia in evalua ting whether a prac tice is part of the “business of insurance ,” considering whether : “(1) the prac t i ce h as the eff ect of transfe rring or sprea ding a policy holder’s risk; (2) the prac tice is an integ ral part of the policy rela tionship betwee n the insurer and the insured; and (3) the prac tice is limit ed to entities within the insurance industry .” Munich Am. Reinsurance
Co. , 141 F.3d a

t 590–91 (citing Union Labor L ife Ins. Co. v. Pireno , 458 U.S. 119, 129 (1982)). 2

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. S e e A u t r

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. W

a r d , 1 1“ I

n s u r ance companies may do many things which are subject to para mo u n t f e d e r a l r e g u la ti o n ; only when they are eng ag ed in the ‘business of insurance ’ does the [MFA] apply .” Nat’l Sec. Inc. , 393 U.S. at 459–60. Ex amples of prac tices that fall within the scope of the MFA include the fix ing of rate s, the selling and adve rtising of policies, and the licensing of insurance companies and their
ag ents. See id. at 460. Other examples include the writing of insurance contra cts and t h e actua l perf ormanc e of those contra cts. Fabe , 508 U.S. at 503. One court has summari z ed t h at “[t] he ‘busi n es s of insurance ’ ref ers to the marke ting, selling, enter ing into, manag ing, servicing , and perf orming of insurance contra cts.” Life Part n er s , In c. v. Morrison , 484 F.3d 284, 294 (4th Cir. 2007). Wit h the Supreme Court’s g uidance in mind, we evalua te the L eg islat u re ’s purpose in

enac ting Chapte r 74. We have previously explained Chapter 74’s history : The TML I I A was enac ted in 1 9 77 to relieve a medical “cr isis having a materia l adver se eff

ect on the delivery of medical and health car e in Texas.” Act of May 30, 1977, 65th L eg ., R.S., ch. 817, § 1.02(6), 1977 Tex. Gen. L aws 2039, 2040 (re peale d 2003). I n 2003, fac ing another “medica l malprac tice insurance crisis” and a corr es p o n d ing “inordinate [] ” incre ase in the fre quency of [health car e liability claims] filed since 1995, the L eg islature repe aled the TML I I A, amending parts of the previous article 4590i and rec odify ing it as Chapter 7 4 o f the Texas Civil Practice and Remedie s Code.

5 2 6 U

. S

. 3 5 8 , 3 7 3 ( 1 9 9 9 ) ( e m p h a s i s a d d e d ) ( c i t i n g M e t r o
. L i f e I n s
. C o
. v
. M a s s a c h u s e t t s , 4 7 1 U

. S

. 7 2 4 , 7 4 3 ( 1 9 8 5 ) )

. F i n a l l y , c u m u l a t i n g t h e c h a o s , t h e S u p r e m e C o u r t u l t i m a t e l y r e j e c t e d a p p l i c a t i o n o f t h e P i r e n o f a c t o r s a s b e i n g b e n e f

i c i a l t o i n t e r p r e t t h e p h r a s e “ l a w . . . w h i c h r e g u l a t e s i n s u r a n c e ” i n c a s e s i n v o l v i n g t h e E R I S A s a v i n g s c l a u s e
. K y
. A s s ’ n o

f H e a l t h P l a n s , I

n c
. v
. M i l l e r , 5 3 8 U

. S

. 3 2 9 , 3 4 0

– 4 2 ( 2 0 0 3 )

. H e r e , t h e c o u r t o f a p p e a l s c o n c l u d e d t h a t “ a t h o r o u g h a n a l y s i s [ o f t h e M F A ’ s f i r s t c l a u s e ] s h o u l d i n c l u d e c o n s i d e r a t i o n o f t h e P i r e n o f a c t o r s
. ” 4 0 6 S

. W

. 3 d a t 3 2 4

. W e d o n o t d i s a g r e e , b u t w e n e e d n o t d e c i d e w h e t h e r a p p l i c a t i o n o f t h e s e f

a c t o r s i s a m a n d a t o r y c o m p o n e n t o f a f i r s t

- c l a u s e M F A i n q u i r y . I n s t e a d , w e a d d r e s s t h e t h r e e f a c t o r s i n r e s p o n s e t o t h e p a r t i e s ’ a r g u m e n t s a n d t h e c o u r t o f a p p e a l s ’ a n a l y s i s
. 1 2Tex. W

. Oaks Ho s

p
. , LP v. W

illiams , 371 S.W .3d 171, 177 (Tex. 2012) (alter ations in orig inal) (citation omitted). Reg arding Chapter 74’ s prede cessor , article 4590i, we have stated that:
As its title sug g ests, the “Medic al L iability and I nsuranc e I mprovement Act of Texas” was expressly intended to reduc e costs of medical insurance

. See art. 4590i, § 1.01. The rea son for enac tment was a “medica l malprac tice insurance crisis in the State of Texas.” Id. § 1.02(a) (5) (e m p hasis added)

. Of the 13 leg islative finding s stating why Article 4590i was adopted, virtually ever y one is expressly rela ted to the cost of malpra ctice insura nce. See id. § 1.02(a)

. Aviles v. Aguirre , 292 S.W .3d 648, 649 (Tex. 2 0 0 9 ) (per curia m). Concerning Chapter 74’s
structure , we ha

ve re cog nized that “[t ]he TML A provides a statutory fra mework g overning health

car e liability cla i m s
. ” C

HC A W oman’s Hosp., L.P. v. Lidji , 403 S.W .3d 228, 232 (Tex. 2013). Specifica lly

rela ting to insuranc e, we have a cknowledg ed that: [C hapter 74] wa s enac ted in 2003 as part of House Bill 4, a top-to-bottom ove rhaul of Texas malprac tice l aw t o “make aff ordable medical and health car e more acc essible and available to the citizens of Texas,” and to “do so in a manner that will not unduly re s t ri ct a claimant’s rig hts any more than nece ssary to deal with the crisis.” The omnibus bill m ak es ex plicit finding s descr ibing the L eg islature’s conce rn that a spike in healthca re- liability claims had fuele d an insurance crisis that was harming healthca

re delivery in Texas. The L eg islature specific ally found that the cr isis had often made insurance unavailable at any price

. Metho d i st Healthcare Sys. of San Antonio, Ltd. v. Rankin , 307 S.W .3d 283, 287 (Tex. 2010) (citations omitted). “F undamentally , the g oal of the [TML I I A] a nd the [TML A] ha s been to make health car e in T exas more available and less expensive by reduc ing the cost of health car e liability claims.” Scoresby v. Santillan , 346 S.W .3d 546, 552 (Tex. 2011). Most rec ently , we descr ibed that the TML A “wa s aimed at broade ning acc ess to health car e by lowering malprac tice insurance premiums.” Tenet Hosps. Ltd. v. Rivera , 445 S.W .3d 698, 707 (Tex. 2014).

1 3Thus, we have made it abundantly clea r that the TML A and its pred e cessor wer e laws enac ted for the purpose of making health car e more aff ordable in Texas. As noted, the TML A soug ht to achie ve this g oal by “re ducing the cost of health car e liability claims.” Scoresby , 346 S.W .3d at 552.
I n other words, Chapter 74 was a law enac ted for the purpose of imposing tort ref orm to further the
g oal of making health car e more aff ordable in Texas. But this say s l i t tle about how Chapter 74
reg ulates the “ business of insuranc e” a s the Supreme Court has e x plained that phra se. The c ourt of appe als focuse d entirely on how Chapter 74 impacts the re lationship between malprac tice insurers and health car e providers, but failed to consider how Chapter 74 rela ted to the rela tionship betwee n patients and their insurance comp anies. Cf. Nat’l Sec. Inc. , 393 U.S. at 460 (“The cruc ial point is that here the State has focuse d its attention on stockholder protec tion; it is not attempting to secure t h e i n t erests of those purcha sing insurance policies.”). The Be nefic iaries contend that t h e prea

mble to the TML I I A, which was copied into the leg islative finding s for the
TML A but did not make it into the statutory text , establishes the L eg islature’s purpose of enac ting
“a compre hensive statutory scheme to protec t the rela tionship betwee n heal t h care provider policy holders and insure rs.” Althoug h ignor ed by both the court of a

ppeals a nd the B enef

iciarie s,

sever al of the leg islative finding s also addre ssed how the so-ca lled “medica l malprac tice cr i s is” impacted he alth car e patients: (8) the direc t cost of m edica l car e to the patient and public of Texas has m ater ially incre ased due to the r ising cost of malprac tice insurance protec tion for phy sicians and hospitals in Tex as; (9 ) the crisis has incre ased the cost of medical car e both direc tly throug h fees an d indirectly throug h additional service s provided for protec tion ag ainst future suits or claims, and defe nsive medicine has resulted in incre asing co s t to patients, private

1 4insurers, and Texas and has contributed to the g ener al i n fl at i o n that has marke d

health ca re in re cent y ear s; (10) sa tisfactory

insurance cover ag e for

adequate amounts of insuranc e in this area is often not available at any price [.]
Act of J une 2, 2003, 78 t h L eg ., R.S., ch. 204, § 10.11(a) (8)–( 10), 2003 Tex. Gen. L aws 884–85. Another finding summarized the eff ect of the law: “the adoption of cer t ain modifications in the medical, insurance , and leg al sy stems, the total effect of which is currently undetermine d , will have a posi tive eff

ect on the rates char g ed by insurers f or medica l profe ssional liability insurance .” Id. § 10.11(a) (12) ( emphasis adde d). These leg islative finding s stop short of establishing a purpose of reg ulating the “business of insurance ” under rele vant Supreme Court prec edent. Although the future eff ect of the chang es wer e

uncer tain when the L eg islature enac ted Chapter 74, it is possible the ref orm that was implemented ultimately

“re sult[ ed] in cost savings to [t he insurer] which may be ref lected in lowe r premiums if the cost saving s are passed on to policy holders.” Group Life & Health Ins. Co. v. Royal Drug Co. , 440 U.S. 205, 216 (1979). But in R o ya l Dr u g , the Supreme Court rec og nized that even when insurance companies lowere d rate s and passed along cost saving s, that was too br oad for purposes of the MFA, “which exempts the ‘business of insurance ’ and not t h e ‘busi ness of insurance companies.’ ” Id

. at 216–17. Such aspirations of lower insurance rate s wer e the entire rea son Chapter 74 was enac ted—to place limit ations on health car e liability claims so that medical malprac tice insurers would lower rate s for health car e providers in hope that those co s t s av i ng s would trickle down to patient policy holders and their insurers. This tenuous impact on the “business of insuranc e” i s insufficient to extend MFA protec tion to Chapter 74. See id ; see also Fabe , 508

1 5U.S. a t 508–09 ( “ Royal Drug reje cted the notion that such indire ct eff ects are sufficie nt f

or a state law to avoid pre -emption under the [MFA].”) (citations omitted). Although Chapter 7 4 as a whole has too tenuous of a connec tion to the “business of insurance ” for purposes of the MFA, we must not forg et Fabe ’s direc tive that “[t] he broad cate g ory of laws enac ted ‘for

the purpose of

reg ulating the business of insuranc e’ consists of laws that

. . . .

nece ssarily encompa ss[ ] more than just the ‘business of insurance .’” Fabe , 508 U.S. at 505 (quoting
B L A C K ’ S L A W D I C T I O N A R Y 1236, 1286 (6th ed. 1990)). This broade r cate g ory includes “laws that
possess the ‘end, inten

ti on, or aim’ of adjusting, manag ing, or controlling the business of insurance .” Id. The court of appea ls ex am i n ed C h apter 74 as a whole, relied on opinions of sever al other
courts of appea ls that have analy zed the TML A or its prede cessor , and conclude d that “sec tion
74.451 i s p ar t o f a law enac ted for the purpose of protec ting and manag ing the perf ormanc e of insurance policies in the are a of medical malprac tice and health car e liability , and is there fore within the broa d cate g ory

of laws e nacte d ‘for the purpose of reg ulating the business of insurance .’” 406
S.W .3d at 3 2 4

. I n re ac h ing this conclusion, the court of appea ls believed it was nece ssary to consider the three Pireno criter ia. Id. I t em p h as ized Fabe ’s rec og nition that “per formanc e of an insurance contra ct satisfies all three Pireno criter ia beca use without perf

ormanc e there is no transfe r of risk, and perf

ormanc e of a policy is integ ral to the insurer/insure d rela tionship and is confine d to entities within the insurance industry .” Id. (citing Fabe , 508 U.S. at 503–04). I n essenc e, the court of appea ls focuse d on the rela tionship betwee n medical malprac tice insurer s and health car e

1 6providers, and joined other Texas c ourts that have held “that section 74.451 was enac ted as part of

an ef fort to re g ulate the business of me dical malpra ctice insura nce in Te x as.” Id. at 326. The court of appea ls and the Be nefic iaries b oth rea ch bare , unsupported conclusions that Chapter 74 is aimed at manag ing or enfor cing the perf ormanc e of insurance contra cts. I n Fabe , the Supreme Court held that the Ohio priority statute was “integ rally rela t ed to the perf ormanc e of insurance contra cts” because it was “desig ned to car ry out the enforce ment of i nsuranc e contracts by ensuring the pay

ment of policy

holders’ claims despite the insuran ce co mpany ’s intervening bankruptc y .” Fabe , 508 U.S. at 504. I n contra st, Chapte r 74 has no bear ing on whether a claim is paid or cover ag e is denied, nor does it presc ribe the terms of insurance contra cts or set the rate s that
i n s u ra n ce companies can char g e. See id. at 502–04. Chapter 74 is also silent about “the ty p e o f policy which could be issued, [or] its reliability , interpre tation, and enfor ceme nt.” Nat’l Sec., Inc. , 393 U.S. at 460. I n fac t, the only possible threa d ty ing Chapter 74 to ins u ra n ce co n trac ts is the aspiration of low er p remium rate s, which, as noted, is not enoug h to qualify for the MFA’ s protec tion under Royal Drug

. See Royal Drug , 440 U.S. at 216–17. Once the parties to an insurance
contra ct ag ree upon a premium rate , Chapter 74 cea ses t o m at ter to the rela tionship betwee n the insurer a nd the insured. The Be nefic iaries have failed to show that Chapter 74 is aimed at protec ting or reg ulating the perf ormanc e of an insurance contra ct in satisfac tion of all three Pireno fac tors. See Fabe , 508 U.S. at 504–05 (c oncluding that perf ormanc e of an insurance contra ct s atisfies all t hree Pireno fac tors, and laws “‘a imed at protec ting or reg ulating’ the perf ormanc e of an insurance contra ct” fall within the MFA)

. The Be nefic iaries offe r no other support for the court of appea ls’ conclusion that Chapter

1 774 was enac ted to reg ulate the business of insurance

. For purposes of the MFA, we are satisfied that

Chapter 74, as a whole, was not a law enac ted by the Texas L eg islature for the purpose of reg ulating the business of insuranc e. The court of a ppeals e rre d in concluding otherwise.
B. Section 74.451
Be cause the test to deter

mine whether laws are enac ted for the purpose of re gu l ati ng the business of i nsuranc e is broad, it is possible that a law, in its entirety , would fail to qualify for the
MFA’ s exemption from pree mption, but a specific statutory provision cou ld q u a li f y by “possess[ing] the end, intention, or aim of adjusting, manag ing, or controlling the business of insurance .” Fabe , 508 U.S. at 505 (interna l quotations omitted); see, e.g. , Pache co , 71 P.3d at 383 (“I t is irrele vant that other sections o f t h e [ Colorado Hea lth Care Availability Act], outside of sections 13–64–403(3) and (4), addre ss medical malpractice issues not involving the rela tionship b et we en an insurer and insured.”)

. As one court of appea ls has rec og nized, “ Fabe teac hes that the entirety of a statute need
not be trea ted in such a way as to overlook the particula rized g oals of discrete statutory provisions.” Villas of Mount Pleasant, LLC v. King , __ S.W .3d __, __, No. 06-14-00045- CV, 2014 WL 7447926,
at *6 (Tex. Ap p
. — T ex arkana Dec

. 31, 2014, no pet.). There fore , it is nece ssary to also analy ze whether section 74.451 wa s enac ted for the purpose of reg ulating the business of insuranc e. The court of appea ls considere d the g rea ter statutory scheme that section 74.451 was enac ted under but failed to g ive meaning to Fabe ’s holding tha t the parts of a state law tha t conflict with a fede ral laware exempt from pre emption under the MF A only “to the extent that [ the state statute]
reg ulates policy

holders.” Fabe , 508 U.S. at 508. I n other words, we i n t erpr et Fabe to mean that
courts must also look to the specific provisi o n o f s t at e l aw that conflicts with fede ral law to

1 8deter

mine whether the clashing parts of the state law wer e enac ted for the purpose of reg ulating the business of insurance

. Id. at 509 (“B y this decis i o n , we rule only upon the clash of priorities as
pronounce d by the respective provisions of t he federa l statute and the Ohio Code.”); see also Am. Heritage Life I

ns. Co. v . Orr , 294 F.3d 702, 708 ( 5th Cir. 2002) (“The party seeking to a

vail itself of the [MFA] must demonstrate that application of the FAA would invalidate, impair, or superse de

a particular state law that reg ulates the business of insurance .”) (empha sis a dded). This a pproac h align s with the fac t that the FAA does not conflict with all of Chapter 74, but only with section
74.451. 3
At the out set, Fabe expressly rec og nized that the Ohio priority statute was enacte d as part of an “administrative structure for the reg ulation of insurance companies.” Fabe , 508 U.S. at 494.
Yet mere ly being a part of an overa ll scheme that was enac ted to reg ulate insurance companies was insufficient to exempt the entire priority statute from pree mption, see id. at 508–09, and the Supreme
Court expressly reje cted an all-or- nothing approa ch that would trea t the statute “as a packa g e which

s t ands or falls in its entirety .” Id. at 509 n.8. I nstead, the Court looked closely at t h e s t at u t e an d
p ar s ed throug h it to deter mine which parts of the priority scheme reg ulated policy holders. Id. at 508–09. Here, althoug h the court of appea ls rec og nized this essential part of Fabe ’s holding, it distinguished Fabe by concluding that section 74.451 did not share the same sort of “dual g oals” as

M o r e o v e r , r e f

u s a l t o c o n s i d e r t h e p u r p o s e f o r w h i c h t h e c o n f

l i c t i n g , s p e c i f

i c s t a t u t o r y s e c t i o n w a s e n a c t e d 3
o p e n s t h e d o o r f

o r m a n i p u l a t i o n
. A t l e a s t o n e o t h e r c o u r t h a s r e c o g n i z e d t h i s p o s s i b i l i t y b y n o t i n g t h a t “ a s t a t e c o u l d a v o i d a f e d e r a l p r e e m p t i o n b y s i m p l y p u t t i n g t h e s t a t u t e s i n t o a s e c t i o n o f t h e s t a t e ’ s s t a t u t e s d e a l i n g w i t h a g e n e r a l
u n a f f e c t e d s u b j e c t

. ” T

r i t o n L i n e s , I

n c
. v
. S t e a m s h i

p M u t

. U n d e r w r i t i n g A s s ’ n ( B e r m u d a ) L t d

. , 7 0 7 F

. S u p p
. 2 7 7 , 2 7 9 ( S

. D

. T e x . 1 9 8 9 )

. 1 9the Ohio st at u t e that led t o the C ourt’s caref ul parsing in Fabe

. 406 S.W .3d at 325. The court of
appea ls held, albeit incorre ctly , that section 74.451 was part of a l aw enac ted for the purpose of
reg ulating the business of insurance , and it looked no further

. Id. at 324. I n an opinion that the court of appea ls relied on heavily , another court of appea ls rea ched a differ ent conclusion. See Kepka , 178
S.W .3d at 291. K

ep ka n o t ed h ow the arbitra tion provisions in the TML I I A rela ted to the
L eg islature’s overa ll statutory purpose and took car e to po i nt out that “the L eg islature not only intended to protec t patients by it, but could also have deter mined that the section’s protec tions could reduc e litigation over arbitra tion a g ree ments’ enfor cea bility —there by keeping down this aspec t of litigation cost.” Id. We ag ree with Kepka in this limit ed respect, and bear ing in m i n d t h e g rea ter statutory framework in which it was enac ted, we look to whether the L eg islature enac ted section 74.451 for the pur

pose of r eg ulating the business of insuranc e. Much like the rest of Chapter 74, section 74.451 has li t t le to do with “the rela tionship betwee n the insurance company and its policy holders.” See Fabe , 508 U.S. at 501; see also Villas of Mount Pleasant, LLC , __ S.W .3d at __, 2014 WL 7447926, at *7 (“[Section 74.451] has nothing to do with the rela tionship betwe en insurers and insureds and is not integ ral to tha t r elationship.”). Relevant he re, se ction 74.451(a) states:
No phy sician, profe ssional as s o ci at ion of phy sicians, or other health car e provider shall reque st or require a patient or prospec tive patient to execute an ag reem en t t o arbitra te a health care liability claim un l es s t h e fo rm of agr eeme nt delivere d to the patient contains a written notice in 10-point boldfac e ty pe clea rly and conspicuously stating:
UNDER TEXAS L AW, TH I S AG REEMENT I S I NVAL I D AND OF NO L EGAL E FFE C T UNL ESS I T I S AL SO SI GNED BY AN ATTORNEY OF YOUR OWN CHOOSI NG

. THI S AGREEMENT CONTAI NS A WAI VER OF I MPORTANT

2 0L EGA L RI G H T S, I N CL UDI NG YOUR RI GHT TO A J URY. YOU SHOUL D NOT SI GN THI S AGREEMENT WI THOUT FI RST CONSUL TI NG WI TH AN ATTORNEY.
T E X
. C I V
. P R A C
. & R E M
. C O D E § 74.451(a)

. Section 74.451 conce rns the rela tionship betwee n the patient and the health car e provider. I t rec og nizes the patient’s rig ht to asser t a health car e liability claim aga inst the health car e provider and require s the health car e provider t o g ive s pecif ic not ice
to the patient to eff

ectua te an agr ee m en t t o ar bitrate a claim. See id. Section 74.451 is not an arbitra tion statute of g ener al applicability , which courts have routinely held to fall bey ond the scope of the MF A, e.g. , Hart v. Orion Ins. Co. , 453 F.2d 1358, 1360 (10th Cir. 1971), bec ause it applies only to ag ree ments to arbitra te health care l i abil ity claims. See Pache co , 71 P.3d at 381–82 (conc luding that the contested arbitra tion statute “is not a statute of g ener al applicability beca use it targ ets only arbitra tion a g ree ments contained in medical service s contra cts”). Conversely , section
74.451 is also not an arbitra tion statute that rela tes specific ally to insurance contra cts, which courts have found to fall under the MFA’ s protec tion. See e.g. , Nat’l Home Ins. Co. v. King , 291 F. Supp. 2d 518, 529 (E.D. Ky

. 2003) (surve y ing case s and concluding that “both fede ral and state courts have held that state statutes that invalidate arbitra tion clause s specific ally as to insurance contra cts are indeed ‘ena cted for the purpose of reg ulating the business of insurance ’ and thus not pree mpted by the FAA by virtue of the [MFA]”). S ec t i o n 7 4

. 4 5 1 is there fore an arbitra tion statute of specific applicability that applies to ag ree ments to arbitra te health car e liability claims. Section 74.451 does not, howeve r, apply direc tly to insurance contra cts. See Life Partners, Inc. , 484 F.3d at 293 (citing
Pireno , 458 U.S. at 130) (“A contra ct of insura nce is one by

which an insured transfe rs risks to a n insurer f or the pa y ment of a pr emium.”).

2 1The Be nefic iaries nonetheless co n t en d that “sec tion 74.451 applies to the proce ssing of

disputed claims ag ainst policy holders, which has a direc t and substantial eff ect on the perf

ormanc e of an insurance company ’s defe nse and indemnity obliga tions under its insurance contra ct with the
p o l icy holders.” Once ag ain, both the Be nefic iaries and the court of appea ls fail to explain ho w enfor ceme nt of the arbitra ti o n clause in Z apata ’s pre- admission ag ree ment with Fr eder icksburg rela tes to the perf

ormanc e of the insurance contra ct betwee n either the patient and her insurer or the health car e provider and its insurer. The pre- admission ag ree ment wa s not “betwe en insurer and insured.” See Royal Drug Co. , 440 U.S. at 216. Rather, it wa s a separ ate contra ctual arr ang ement between an i n sured patient and a presumably insured health car e provider eng ag ed in perf orming service s other than insurance

. See id. ; see also St. Bernard Hosp. v. Hosp. Serv. Ass’n of New 4 Orleans, Inc. , 618 F.2d 1140, 1145 (5th Cir. 1980) (holding that a contra ct for the purcha se of g oods and service s did not fall within the meaning of “business of insurance ”). I n o t her words, section 74.451 “may

serve to protect someone who happens to be an ‘insured,’ but it does not protect that person in his ca

pacity as a pa rty to a contra ct of insura

nce.” See A utry , 144 F.3d a t 1044. Thus, the Be nefic iaries’ arg ument stretche s the scope of the MFA too far by sug g esting that the inclusion of particula r terms in an insuranc e co n t ract can invoke the MFA’ s protec tion. The

corr ect focus of the MFA inquiry is to identify the “ law enac ted by any State for the purpose of

I t i s u n k n o w n w h e t h e r F r e d e r i c k s b u r g m a i n t a i n e d a m e d i c a l m a l p r a c t i c e i n s u r a n c e p o l i c y . A s i t s c o u n s e l 4
c o n c e d e d a t o r a l a r g u m e n t , b e c a u s e t h i s i s a n i n t e r l o c u t o r y a p p e a l , t h e r e c o r d h a s n o t b e e n d e v e l o p e d t o r e v e a l w h e t h e r F r e d e r i c k s b u r g w a s i n s u r e d

. W h e n t h i s d i s p u t e a r o s e , n o t h i n g i n C h a p t e r 7 4 o r e l s e w h e r e r e q u i r e d n u r s i n g h o m e s t o c a r r y m a l p r a c t i c e i n s u r a n c e
. W e a l s o n o t e t h i s u n d e r d e v e l o p e d r e c o r d t o b r i e f l y a d d r e s s a m i c i ’ s c o n c e r n s a b o u t t h e i m p a c t o f o u r d e c i s i o n o n H e a l t h M a i n t e n a n c e O r g a n i z a t i o n s ( H M O s )

. B e c a u s e t h e r e i s n o e v i d e n c e t h a t F r e d e r i c k s b u r g o p e r a t e s a s a n H M O , a m i c i ’ s c o n c e r n s a r e n o t p r o p e r l y b e f o r e t h e C o u r t a t t h i s t i m e
.

2 2reg ulating the business of insurance .” 15 U.S.C. § 1012(b) (empha sis added)

. The only law at issue

here —section 74.451—is a law that reg ulates the rela tionship betw ee n p at ients and health car e providers, and “it is not attempting to se cure the interests of those purcha sing insurance policies.” Nat’l Sec. , 393 U.S. at 460. Moreove r, no component of section 74.451 seeks to ensure that “policy holders ultimately will rec eive pay ment on their claims.” Fabe , 508 U.S. at 506. The
Be nefic iaries have failed to show that section 74

. 4 5 1 i s aimed at protec ting or reg ulating the perf ormanc e of a contra ct of insurance —either betwee n the health car e provider and its malprac tice insurer, or the p atient and its insurer—to satisfy all three Pireno fac tors. See id. at 504–05 (conc luding that perf

ormanc e of an insurance contra ct s at i s fi es all three Pireno fac tors, and laws
“‘a imed at protec ting or reg ulating’ the perf ormanc e of an insurance contra ct” fall within the MFA)

. Section 74.451 is not a law enac ted for the purpose of reg ul at i n g t h e b usiness of insurance for purposes of the MFA.
IV. Conclusion Section 74.451 of the Texas Civil Practice and Remedies Code was not a law enac ted by the
Tex as L egi s lature for the purpose of reg ulating the business of insurance

. I t simply applies to
ag ree ments to arbitra te health car e liability cl ai ms betwee n patients and health car e providers.
Acc ording ly , the MFA does not e x empt section 74.451 from pree mption by the FAA , and the trial
court should ha

ve g rante d Fr eder icksburg ’s motion to compel arbitra tion. We r ever se the court of
appea ls’ judgme nt and rema nd this case to the trial court to proce ed in a manner consistent with this opinion.

2 3_______________________________________ Paul W. Green J ustice
OPI NI ON DEL I VERED: Marc h 6, 2015

2 4